Time is Ticking: Are You Prepared for the FCA's September Deadline?

Recently, the FCA sent one of its famous ‘Dear CEO’ letters to 1,000 Annex 1 firms, warning about common failings it identified in their financial crime controls. https://www.fca.org.uk/news/news-stories/fca-warns-firms-over-anti-money-laundering-failings 

This letter was issued in March 2024, and companies now only have 4 months remaining until September 2024, when they need to identify immediate steps to close any identified gaps from this letter.

The letter warns that initial findings from the FCA’s review of these companies indicate that some are still not getting the basics right when it comes to financial crime prevention.

Understandably, this has caused consternation amongst many businesses in this bracket that provide financial services and are registered for compliance with money laundering regulations but are not otherwise authorized or regulated by the FCA. 

Here’s my view (and hopefully some helpful advice) on some of the common issues identified in the letter and what can be done to help address the identified challenges:

“Lack of sufficient resources for Financial Crime”

As cases of money laundering rise, the tendency is for financial institutions to throw more people at the problem. This is not the right move. Instead, they should use their resources more effectively, maximizing human efficiency by augmenting their talent with the latest technology, such as generative AI.

 AI can effectively make a team go further – reducing time spent on cases, allowing analysts to concentrate on other tasks, or carry out more investigations. In small teams with big workloads, this can maximize resources and tackle the problem of financial crime effectively and to the high standards recognized by the FCA. 

One of our customers, Visa's Currencycloud, estimates that Lucinity’s AI-powered systems save it around five hours of analyst time every day, freeing those workers up to complete other tasks or tackle a greater number of alerts per day. Significantly, it also drives the right decisions on financial crime, providing analysts with greater insight more quickly and empowering them to prevent more cases of money laundering and fraud.

“Inadequate Financial Crime Training”

The most effective AI systems are empathetic: they work with the user and augment their talents. By working closely with generative AI solutions, the skills of entry-level analysts can be levelled-up, effectively elevating them to a more senior level to provide greater value for businesses. 

Financial institutions can save millions of dollars a year in training costs because less-experienced workers can be onboarded and then upskilled faster with the right technology.

“Absence of a clear audit trail for Financial Crime related decision-making”

Thankfully, the days of untraceable, black-box AI systems are a thing of the past. New, generative AI systems can help financial services provide more transparency and explainability, as well as the highest reliability of results. Again, it’s the right collaboration of human skill and experience working with AI to drive efficiency, effectiveness and explainability.

At Lucinity, when looking at mass amounts of texts, we have developed generative AI, which uses statistical models rounded on benchmarks that have been reviewed by humans. So, there is a form of statistical insurance on the output. We also always reference source material so that AI decisions are auditable.

 “Lack of detail in monitoring procedures”

AI-powered case management systems can also significantly enhance financial crime monitoring processes by bringing together disparate information about customers into a centralized platform, allowing analysts to understand customer behaviour quickly.  

Equipped with these platforms, analysts are more capable of getting to the heart of the issue and understanding whether a particular pattern of behavior is suspicious. They then have the necessary information for further action, research, and investigation.

In short, the biggest mistake that Annex 1 firms could make in response to the FCA letter would be to invest in bigger teams. We believe AI technology can help the financial services industry not only get the basics right when it comes to preventing crime but also supercharge any team's resources so they are doing much more for less.

Lucinity is always here to help if you need some advice on how to close these identified gaps through better technology and training. Contact us for additional guidance: